Gladstone Commercial Announces Third Quarter Results.

* Reports net income available to common stockholders of approximately $1.3 million or $0.16 per diluted weighted average common share

* Reports funds from operations ("FFO") of approximately $2.3 million or $0. 29 per diluted weighted average common share

* Purchased four properties for a total investment of approximately $7.7 million

* Sold two properties for a net gain on sale after taxes of approximately $1.1 million or $0.14 per diluted weighted average common share

MCLEAN, Va. -- Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter ended September 30, 2006. A description of FFO, a relative non -GAAP ("Generally Accepted Accounting Principles in the United States") financial measure, is located at the end of this news release. All per share references are fully diluted weighted average common shares, unless otherwise noted.

Net income available to common stockholders for the quarter ended September 30, 2006 was $1,293,044, or $0.16 per share, compared to $867,411, or $0.11 per share, for the same period one year ago. Net income available to common stockholders for the nine months ended September 30, 2006 was $2,163,784, or $0.27 per share, compared to $2,552,128, or $0.33 per share for the same period one year ago. Net income results when compared to the same period last year were affected by the gain on the sale of the two Canadian properties in July, partially offset by increased interest expense associated with the leveraging of the Company's properties, stock option expense associated with the amendment of options granted under the 2003 Equity Incentive Plan, as amended (the "2003 Plan"), and dividends paid on the Company's preferred stock.

FFO for the quarter ended September 30, 2006 was approximately $2.3 million, or $0.29 per share, compared to approximately $2.0 million, or $0.26 per share, for the same period one year ago. FFO for the nine months ended September 30, 2006 was approximately $7.1 million, or $0.90 per share, compared to approximately $4.9 million, or $0.64 per share for the same period one year ago. A reconciliation of net income, which the Company believes is the most directly comparable GAAP measure to FFO, is set forth below:

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Third quarter highlights:

* Purchased four properties with approximately 121,000 square feet for an aggregate purchase price of approximately $7.7 million;

* Sold two properties for a net gain on sale after taxes of approximately $1.1 million; and

* Acquired one building in satisfaction of the mortgage loan on the Sterling Heights, Michigan property for approximately $11.3 million.

In August 2006, the Company ceased accruing revenues on its mortgage loan secured by an industrial property in Sterling Heights, Michigan, placed the borrower in default and began pursuing available remedies under its mortgage, including instituting foreclosure proceedings on the property. At the foreclosure sale on September 22, 2006, the Company was the successful bidder. The Company recorded the real estate asset at approximately $11.3 million, which equaled the outstanding principal balance and accrued, non-default interest due under the mortgage loan to the Company. On October 20, 2006, the Company executed a lease with a new tenant for the property, with a term of ten years. The lease provides for annual rents of approximately $1.1 million in 2007, with prescribed escalations thereafter. The Company also pursued its deficiency relating to default interest, expenses and prepayment fees of approximately $650,000 against the borrower and its affiliated tenant who had filed for bankruptcy protection and collected approximately $655,000 from the tenant and borrower in October 2006.

On August 31, 2006, all the holders of outstanding stock options accepted the Company's offer to amend their stock options and accelerate the expiration date of the outstanding options to December 31, 2006. Therefore, all currently outstanding stock options must be exercised before December 31, 2006 or will be forfeited on December 31, 2006. The acceptance of the offer allows the Company to enter into an amended and restated investment advisory agreement (the "Amended Advisory Agreement") with the Company's external investment adviser, Gladstone Management Corporation (the "Adviser"), and an administration agreement between the Company and Gladstone Administration, LLC, a wholly owned subsidiary of the Adviser. The Company intends to terminate the 2003 Plan on December 31, 2006. Upon termination of the 2003 Plan, the Company will implement the Amended Advisory Agreement effective on January 1, 2007, the first day of the Company's 2007 fiscal year.

"Our third quarter results were positively affected by the sale of the two Canadian properties for a net gain of $1.1 million. Subsequent to quarter end, we signed a ten year lease with a new tenant for our Sterling Heights, Michigan property, allowing us to create an income producing asset from the previously defaulted mortgage loan on the property," said Chip Stelljes, Executive Vice President and Chief Investment Officer. "We believe the property disposition, the successful leasing of the Michigan property, along with the acquisition of four properties in the third quarter, will benefit our shareholders over the long term and will result in a stronger and more focused portfolio."

Subsequent to quarter end, the Company:

* Declared monthly cash dividends on common stock of $0.12 per common share for each of the months of October, November, and December 2006;

* Declared monthly cash dividends on Series A Preferred Stock of $0.1614583 per share for the months of October, November, and December 2006; and

* Completed the public offering of 1,150,000 shares of Series B Preferred Stock for net proceeds to the Company of approximately $27.4 million.

The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended September 30, 2006, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the SEC and the Form 10-Q can be retrieved from the SEC website at www.SEC.gov or our website at www.GladstoneCommercial.com.

The Company will hold a conference call Wednesday, November 1, 2006 at 8:30 a.m. ET to discuss its earnings results. Please call [phone] to enter the conference. An operator will monitor the call and set a queue for the questions.

The conference call replay will be available two hours after the call and will be available through December 1, 2006. To hear the replay, please dial [phone], access playback account 286 and use ID code 217123.

Gladstone Commercial Corporation is a publicly traded real estate investment trust that focuses on investing in and owning triple-net leased industrial and commercial real estate properties and selectively making long-term mortgage loans. Additional information can be found at www.GladstoneCommercial.com .

For further information, contact Investor Relations at 703-287-5835.

NON-GAAP FINANCIAL MEASURES

Funds from Operations

The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO, as a relative non-GAAP supplemental measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash flows from operating activities determined in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income), and should not be considered an alternative to net income as an indication of the Company's performance or to cash flow from operations as a measure of liquidity or ability to make distributions.

The Company believes that FFO per share provides investors with a further context for evaluating the Company's financial performance and as a supplemental measure to compare the Company to other REITs; however, comparisons of the Company's FFO to the FFO of other REITs may not necessarily be meaningful due to potential differences in the application of the NAREIT definition used by such other REITs.

To learn more about FFO please refer to the Form 10-Q for the quarter ended September 30, 2006, as filed with the Securities and Exchange Commission today.

This press release may include statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regard to the future performance of the Company and the closing of any transaction. Words such as "may," "will," "believes," "anticipates," "intends," "expects," "projects," "estimates" and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans, expectations and beliefs that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended, December 31, 2005, as filed with the Securities and Exchange Commission on February 28, 2006, and the Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2006 and September 30, 2006, as filed with the Securities and Exchange Commission on August 8, 2006, and today, respectively . The risk factors set forth in the Form 10-K and Form 10-Qs under the caption "Risk Factors" are specifically incorporated by references into this press release. All forward-looking statements are based on current plans, expectations and beliefs and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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